August 6, 2026/Cordros Report
We revise our estimates for NASCON Allied Industries Plc (NASCON) following the release of its H1-26 results and subsequent management earnings call. Although H1-26 revenue growth of 3.8% y/y fell short of our expectations, management confirmed that topline growth was driven entirely by volume expansion, with no price increases implemented during the period, underscoring resilient underlying demand despite a still-challenging consumer environment. Accordingly, we now forecast 2026E revenue growth of 7.7% y/y (Prev.: +15.3% y/y), while lowering our 2026E cost of sales growth forecast to 2.9% y/y (Prev.: +6.0% y/y) to reflect stronger procurement optimisation, manufacturing efficiencies and operating cost discipline. Given the downward revision to our revenue and earnings forecasts, we lower our target price to NGN175.61/share (Prev.: NGN204.16/share). Nevertheless, we believe the current valuation appropriately reflects NASCON’s resilient fundamentals and medium-term growth prospects and therefore maintain our “HOLD” recommendation. On our estimates, NASCON currently trades at 12.5x 2026E P/E and 7.6x EV/EBITDA, compared with the Bloomberg Middle East and Africa (MEA) peer averages of 19.2x and 7.6x, respectively.
Lower revenue growth moderates earnings outlook: We revise our 2026E revenue growth forecast to 7.7% y/y (Prev.: 15.3%), primarily reflecting the removal of our previously assumed price increases following management’s confirmation that H1-26 growth was entirely volume-led. We forecast Salt and Seasoning volume growth of 7.7% y/y and 7.9% y/y, respectively, reflecting resilient underlying demand. Our seasoning forecast also incorporates planned production capacity expansion from H2-26. Despite a downwardly revised revenue outlook, continued procurement optimisation, manufacturing efficiencies and wider deployment of CNG-powered trucks are expected to support healthy operating margins, with gross and EBITDA margins forecast to expand by 235bps y/y and 799bps y/y to 50.8% and 37.9%, respectively. Overall, we continue to expect resilient earnings growth, with 2026E EPS projected to rise by 25.9% y/y to NGN15.62 (Prev.: +37.1% y/y to NGN17.01), supported by resilient operating margins, sustained operating leverage and broadly stable net finance income (+0.9% y/y).
Strong free cash flow generation reinforces financial flexibility: We expect NASCON’s cash generation profile to remain robust, underpinned by resilient operating profitability, disciplined working capital management and normalising capital expenditure. Accordingly, we forecast free cash flow to increase to NGN40.28 billion in 2026E (Prev.: NGN38.45 billion), representing a 24.5% free cash flow margin (Prev.: 21.8%), compared with NGN20.19 billion and 13.2%, respectively, in 2025A. Beyond 2026E, free cash flow is projected to average NGN42.15 billion annually over 2026–2030E, with an average free cash flow margin of 27.0%. We believe this level of free cash flow generation should comfortably support sustainable shareholder distributions while preserving the group’s financial flexibility.
Valuation: Our target price is NGN175.61/s derived from an equal blend of a DCF and sector relative valuation approach (P/E & EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN116.04/s) and FCFE (NGN90.22/s), assuming a 23.0% WACC, 23.9% cost of equity, and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN196.67/s) and P/E (NGN299.52/s) multiples, utilising Bloomberg’s Middle East and African peer median for both factors (7.6x and 19.2x) as multipliers.